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Marketing Firm Changes In The Offing For New Projects

Author: Tom Acitelli

55 Wall Street - scene of a marketing firm switch

The slowing residential market will soon help spawn a wave of change in firms marketing new condo projects in Manhattan. Like firing the coach when the team's losing, industry insiders say developers are expected to target their ire at the marketing groups hawking their housing before they aim at any other entity.

"It's what I'm seeing," said Howard Lorber, chairman of brokerage Prudential Douglas Elliman, which includes a new development marketing wing. "There are projects that just aren't selling. They're ill-conceived; maybe they're a bit too pricey. At some point, the developer says, 'Hey, this isn't working out, maybe it's time to switch.'"

In the most conspicuous example of a marketing firm switch, Steve Witkoff, the developer of the luxury Cipriani Residences at 55 Wall Street, dismissed the Corcoran Sunshine Marketing Group in February -- having its reps escorted from the building and paying $500,000 to break the group's contract, the New York Times reported -- and hired archrival Douglas Elliman instead.

Lorber said the industry will see more of the marketing firm switches over the next couple of months. Michael Shvo, president of Shvo Marketing, said at The Real Deal's New Development Forum in early March that he knew of at least five projects that were about to switch marketing firms. Shvo, Lorber, and others would not comment on which projects will change marketers, but all openly speculated about the causes behind the imminent shuffles.

The slowing sales market is only part of the reasoning behind the shuffle; increased competition is another. A developer today dissatisfied with a marketer -- because of tepid sales or something else, such as lack of access to the marketing firm's upper management -- can simply choose from a variety of other marketers.

This wasn't the case a decade ago. Developers of most large residential projects in the city would've had two marketing firms to pick from, said Stephen Kliegerman, executive sales director for Halstead Property. Those two firms, the Sunshine Group (now the Corcoran Sunshine Marketing Group) and the Marketing Directors, now have several competitors, Kliegerman added, and developers of smaller projects have always had more choices in marketers than developers of larger ones.

This greater choice doesn't necessarily translate into better service for developers, however.

"Most marketing companies sell themselves too cheaply because they want the account," said Jacquelyn Sonenberg, managing director of Stribling Marketing Associates. "They're not interested in doing a quality job. They're interested in doing as many jobs as they can get their name on. And, because of that, they cannot afford to hire good salespeople. They hire people with not that much experience, and that's really the crux of the situation."

A marketing firm may cut corners in marketing new projects, driving developers to dump the firm in favor of one that, while more expensive, might provide better service. This marketing on the cheap is a greater cause of firm switches than any slowing sales market, said Sonenberg, whose Stribling marketing operation is one of the more expensive ones in New York, she added.

If it doesn't, then the announcement of a marketing firm switch shouldn't be a surprise. "I think in the next 60 days," Lorber said in mid-March, "you'll see more announcements. We're working on a few [switches], and I'm sure we're not the only ones."